On June 21, 2018, the US Supreme Court overturned the 1992 Quill decision that required a company to have nexus that involved a physical presence within a state for that state to require them to withhold sales tax. The decision in South Dakota v. Wayfair will have a direct impact on how nexus is determined and how states collect sales tax in states throughout the country.
The 1992 Quill decision was made before the rise of eCommerce, and was seen, by many states, as out of touch with current economic conditions. States started to see a decline in sales tax revenue in the early 2000s, which accelerated in the last decade. As a result many of them started to pass what are known as Economic Nexus laws.
These laws effectively tell online sellers that regardless of their physical presence, if they meet the minimum threshold for number of sales or total sales volume, they must collect and remit sales tax for sales that ship to residents in that state. The first of these laws was passed nearly 15 years ago in Ohio, but it wasn’t the last. There were more than 20 such laws on the books or under consideration when South Dakota passed Senate Bill 106, which not only established economic nexus, but was aggressive in pursuing those that did not comply. The result was a lawsuit by those vendors – Wayfair, Newegg, Overstock.com and Systemax. The lawsuit moved through the court systems until the Supreme Court weighed in in 2018, overturning the Quill decision and making economic nexus legal and constitutional.
While not specifically noted in the Supreme Court’s decision, the language outlines the need for common sense thresholds to avoid excessive burden on small vendors. The result is that most states have adopted a threshold of $100,000+ in sales per year or 200+ separate sales transactions per year. In addition, many states are implementing Marketplace Facilitator laws that task marketplaces like Amazon and eBay to collect sales tax on behalf of the third-party vendors who use their sites, simplifying the process.
Most states that have laws on the books, bills pending, or potential new legislation have avoided attempting to collect sales tax retroactively. That means businesses that meet these thresholds will need to be compliant from the date they were enacted, or from the point in 2018 when they were upheld. It’s important to evaluate the specific rules for your state, however. While many states are attempting to keep it simple by participating in the Streamlined Sales and Use Tax Agreement or implementing Marketplace Facilitator laws, they aren’t all the same. Especially if you do a large volume of business across multiple states, it’s important to know exactly what is expected of you in each.
In the chart below, you will find a reference to the implementation of the current nexus laws, links to the original source material from the state, and a summary of who qualifies and what is currently required. This is a high-level overview that’s meant to give you an idea of the breadth of the laws and any small seller exemptions; please refer to the actual law when making business decisions.
| State | Date in Effect | Summary of Rules | State Reference |
|---|---|---|---|
| Alabama | 10/1/2018 | $250,000 or more based on previous calendar year | State Website |
| Alaska | 1/6/2020 | $100,000 or more based on previous calendar year, or 200 transactions | State Website |
| Arizona | 10/1/2019 | $200,000 or more based on previous calendar year (decreases in 2020) | State Website |
| Arkansas | 7/1/2019 | $100,000 or more based on previous calendar year, or 200 transactions | State Website |
| California | 4/1/2019 | $500,000 in the preceding or current calendar year | State Website |
| Colorado | 6/1/2019 | $100,000 or more based on previous calendar year | State Website |
| Connecticut | 12/1/2018 | $250,000 or more based on previous calendar year, and 200 transactions | State Website |
| Georgia | 1/1/2019 | $250,000 or more based on previous calendar year, or 200 transactions | State Website |
| Hawaii | 7/1/2018 | $100,000 or more based on previous calendar year, or 200 transactions | State Website |
| Idaho | 6/1/2019 | $100,000 or more based on previous 12 months | State Website |
| Illinois | 10/1/2018 | $100,000 or more based on previous calendar year, or 200 transactions | State Website |
| Indiana | 7/1/2017 | $100,000 or more based on previous calendar year, or 200 transactions | State Website |
| Iowa | 7/1/2019 | $100,000 or more based on previous calendar year | State Website |
| Kansas | 10/1/2019 | No small seller exemption | State Website |
| Kentucky | 7/31/2018 | $100,000 or more based on current or previous calendar year, or 200 transactions | State Website |
| Louisiana | 1/1/2019 | $100,000 or more based on current or previous calendar year, or 200 transactions | State Website |
| Maine | 10/1/2017 | $100,000 or more based on previous calendar year, or 200 transactions | State Website |
| Maryland | 10/1/2018 | $100,000 or more based on previous calendar year, or 200 transactions | State Website |
| Massachusetts | 10/1/2019 | $100,000 or more based on previous calendar year | State Website |
| Michigan | 10/1/2018 | $100,000 or more in previous calendar year, or 200 transactions | State Website |
| Minnesota | 10/1/2018 | $100,000 or more retail sales, or 200 transactions | State Website |
| Mississippi | 12/1/2017 | $250,000 or more in previous 12 months | State Website |
| Nebraska | 1/1/2019 | more than $100,000 annually, or 200 transactions | State Website |
| Nevada | 10/1/2018 | more than $100,000 in current or previous calendar year, or 200 transactions | State Website |
| New Jersey | 11/1/2018 | more than $100,000 in current or previous calendar year, or 200 transactions | State Website |
| New Mexico | 7/1/2019 | $100,000 in the previous calendar year | State Website |
| New York | 1/1/2019 | more than $500,000 in the previous calendar year, and 100 transactions | State Website |
| North Carolina | 11/1/2018 | more than $100,000 in current or previous calendar year, or 200 transactions | State Website |
| North Dakota | 1/1/2019 | $100,000 or more based on previous calendar year | State Website |
| Ohio | 8/1/2010 | $100,000 in current or previous calendar year, or 200 transactions | State Website |
| Oklahoma | 11/1/2019 | $100,000 or more in previous calendar year | State Website |
| Pennsylvania | 7/1/2019 | $100,000 or more in previous 12 months | State Website |
| Rhode Island | 8/7/2017 | $100,000 or more based on previous calendar year, or 200 transactions | State Website |
| South Carolina | 11/1/2018 | Sales in previous or current calendar year exceeds $100,000 | State Website |
| South Dakota | 5/1/2016 | $100,000 or more based on previous calendar year, or 200 transactions | State Website |
| Tennessee | 7/1/2017 | Exceeding $500,000 in previous 12 months | State Website |
| Texas | 1/1/2019 | Exceeding $500,000 in previous 12 calendar months Note: To allow time for remote sellers to prepare for these changes, the amendments postpone the permitting and tax collection requirements for remote sellers until Oct. 1, 2019. The initial 12 calendar months for calculating a remote seller’s Texas revenues will be July 1, 2018, through June 30, 2019. | State Website |
| Utah | 1/1/2019 | $100,000 or more in previous or current calendar year, or 200 transactions | State Website |
| Vermont | 7/1/2018 | $100,000 or more based on previous calendar year, or 200 transactions | State Website |
| Virginia | 7/1/2019 | $100,000 or more based on previous or current calendar year, or 200 transactions | State Website |
| Washington | 1/1/2018 | $100,000 or more in previous or current calendar year Note: Retailers with sales of $10,000 or more subject to Notice and Reporting | State Website |
| Washington, D.C. | 1/1/2019 | $100,000 or more in a 12-month period, or 200 transactions | State Website |
| West Virginia | 1/1/2019 | $100,000 or 200 transactions in previous calendar, or for the remainder of the current year if either threshold is met during the current year | State Website |
| Wisconsin | 10/1/2018 | $100,000 or more based on previous calendar year, or 200 transactions | State Website |
| Wyoming | 1/1/2019 | $100,000 or more based on previous calendar year, or 200 transactions | State Website |
Because of the nature of the Supreme Court’s ruling in South Dakota vs. Wayfair, it is likely more states will implement new rules in the coming months and this chart will be updated accordingly, both for those laws that are changed from their current status and for new laws in states that have not yet passed economic nexus legislation.
Last updated May 27, 2020